Reporting Bitcoin on taxes

[fundus]

I know the general rule is that you're suppose to report all bitcoin transactions to the IRS, but if you're not making large transactions over 10K annually then would it still be advisable to answer yes on your tax return?

Most of us who use bitcoin to pay for meds are only purchasing enough to cover these costs. I'm not investing large sums into BTC, nor am I making many transactions, maybe 3 a year. Yet, from what I have read, the said rule is that if you purchase any amount of BTC you must answer yes on your tax form.

Nobody wants to be audited or caught lying about transactions, but at the same time who wants to be put on a list just because you bought and spent a few hundred dollars of BTC? I don't know about anyone else but I find this to be confounding problem every year I do a tax return, the question always comes up now "Did you purchase any Crypto-Currency in the past year"?

What is the right to do? I personally always say no, because the amount I purchase is so insignificant I don't think it will throw any red flags.

 

[Name taken]

I know the general rule is that you're suppose to report all bitcoin transactions to the IRS, but if you're not making large transactions over 10K annually then would it still be advisable to answer yes on your tax return?

Most of us who use bitcoin to pay for meds are only purchasing enough to cover these costs. I'm not investing large sums into BTC, nor am I making many transactions, maybe 3 a year. Yet, from what I have read, the said rule is that if you purchase any amount of BTC you must answer yes on your tax form.

Nobody wants to be audited or caught lying about transactions, but at the same time who wants to be put on a list just because you bought and spent a few hundred dollars of BTC? I don't know about anyone else but I find this to be confounding problem every year I do a tax return, the question always comes up now "Did you purchase any Crypto-Currency in the past year"?

What is the right to do? I personally always say no, because the amount I purchase is so insignificant I don't think it will throw any red flags.

That is a very good question because it gets very complicated to report on taxes. There is software I believe called coin tracker that helps automate some of it but I personally don’t want to report it. On the other hand I don’t look forward to getting audited either. Very good question, I am looking forward to peoples responses.

 

[fundus]

I think as long as you're not making profits or doing transactions over 10K then you can fly under the radar, at least for now. I personally just don't like doing my taxes and being asked if I purchased "any bitcoin", obviously the answer is no. But, when you have large firms like Coinbase being watched closely by the FTC, you know they're watching that closely with every passing day.

 

[Japaholic]

No one asks if you buy or use Amazon gift cards or for details of your PayPal transactions, this is the same. My situation is unusual in that I am non dom, expat with less restrictive tax laws than the USA.

I treat my bitcoin purchases like prepaid Visa cards, I buy and use it to purchase things, no need to declare that I think.

 

[Name taken]

I don’t think exchanges like Coinbase file a 1099 for everyone, I think there’s a certain threshold. Still I am afraid not to report it on my taxes but if I do I will need some sort of bitcoin or crypto tracking software for taxes. I know it doesn’t pay to be too honest but if I was audited, I can’t go back and say oops I forgot to report that.

 

[Santa's little helper]

Suspect there is a minimum threshold as mentioned above; curious about the the 2021 T1 General as well, if it also includes the crypto inquisition. Available if you have Turbo tax apparently

 

[Lordy]

I heardanecdotally that a guy who knew a guy Had a metal bitcoin credit card, by make purchase via this meands kina slips under the radar ..back in my somewhat more modreate spending world; although a little off topic but related to charges ..last time I traded in bitcoin my fees made it prohibitively expensive ...
it was only $100 worth and the fees were $15..wonder if anyone could reccomend a more reasonable wallet..

 

[fundus]

I don’t think exchanges like Coinbase file a 1099 for everyone, I think there’s a certain threshold. Still I am afraid not to report it on my taxes but if I do I will need some sort of bitcoin or crypto tracking software for taxes. I know it doesn’t pay to be too honest but if I was audited, I can’t go back and say oops I forgot to report that.

The chances of being audited is something like 0.06%, and typically that's only done if you've had huge gains or deductions that would raise a red flag. The most important thing is to just make sure and file, the question about crypto is tricky, and if you say yes the extra form you have to fill about how much you bought, gained, lost, etc. will make your head spin as they want you to break down dates of every transaction, where you bought it and where it went. It's just opening up a can of worms if you ask me. But if Coinbase sent me a 1099 then that's a different story, then you'd have to file it, but from what I've read they only due that for accounts that are dealing in large sums or transactions in the hundreds.

On a side note, I was under the impression you could go to a BTC ATM and purchase anonymously. I went to to a Bitcoin Depot today and not only did it require a phone number and email address, the machine required putting your ID into the machine to have it scanned, so I bailed on doing a cash purchase. I don't see how using an ATM using cash would be any different than just buying a few hundred bucks on Coinbase. If anyone knows how to buy BTC anonymously please let me know.

 

[Bluebell]

yeah they are getting clued in to the taxes.......

 

[fundus]

yeah they are getting clued in to the taxes.......

It's definitely problematic regarding the taxes, but it's even more troubling the tracking of just purchasing and spending it on "goods", because they want to know everything. I hate to sound paranoid but with BTC becoming more popular and accepted around the world, government agencies will eventually figure out a way to make all accountable, regardless of the amount, that's frightening.

 

[CalmSeeker]

My wife is a CPA, I’ll ask her later today and report back. But I’m inclined to say no on the form. If it puts me in a position to explain where I sent it, I’d be fucked. Besides, it’s not like I made any huge gains, I only buy it when I’m about to spend it, I don’t ever hold on to it. If anything, I’ve lost money on it thanks to Coinbase’s fees.

 

[CalmSeeker]

@fundus
Bitcoin ATMs used to be anonymous, some still are. I know of another member on this site that wears a covid mask and sunglasses and only ever gets his coin from that ATM. It’s totally anonymous.
Aside from that, there are various exchanges online that let you trade anonymously, but honestly they all seemed so sketchy to me when I was researching I never tried it.

 

[Bluebell]

although they aways ask on tax doc’s have you used bitcoin, etc......nibby no goods that they are!

 

[fundus]

@CalmSeeker It would be interesting what your wife says about any of this. I'm definitely not answering yes on on taxes, because it's only going to trigger more forms, like I stated earlier they are very confusing and it's just going to raise red flags. I agree, we've all lost $ whether it's from fees or just the prices going down. The ATM's are super sketch in most of the places other than busy gas stations, it's just not a great experience in any way. I'm going to stick with using Coinbase, then transferring those funds to another wallet, that's pretty much as good as it gets in regards to being anonymous, even though it's not at all.

 

[sleeper]

I am not any expert on this, but I do know that the IRS has only one reason, and a very specific one, to know about BTC transaction. It is for reporting on profits, and nothing more. Those who actually invest successfully in BTC would be affected by this, but no one else.

In other words, the actual "reporting" (answering yes) has little to do with it. So in actual practice, one could run one million on BTC transactions, and that would be no different than any other purchase to the feds. The breakdown came in 2015 or so when people started raking huge profits from the return on investment. It is my understanding that if you are simply purchasing goods, then you can safely answer "no" regardless. Even if there is an audit, remember, they do not spend their time pursuing issues which do not increase your taxes. (but i am not an attorney!)

 

[kmontayne]

I have been wondering myself what to say in this section or what to put.
Especially when I am purchasing to just send else where.

 

[Name taken]

I was looking at the cointracker software to make reporting more automated for TurboTax. Part of me wants to just say no I didn’t use any crypto, but I know it would come back to bite me somehow. I’m going to investigate the software and as long as it’s not reporting the addresses that I’m sending to I think I would use it. But this one as other people have mentioned is really tricky. I am so tempted just to say no and forget that portion of my taxes.

 

[TheDeadlySidekick]

I am not any expert on this, but I do know that the IRS has only one reason, and a very specific one, to know about BTC transaction. It is for reporting on profits, and nothing more. Those who actually invest successfully in BTC would be affected by this, but no one else.

In other words, the actual "reporting" (answering yes) has little to do with it. So in actual practice, one could run one million on BTC transactions, and that would be no different than any other purchase to the feds. The breakdown came in 2015 or so when people started raking huge profits from the return on investment. It is my understanding that if you are simply purchasing goods, then you can safely answer "no" regardless. Even if there is an audit, remember, they do not spend their time pursuing issues which do not increase your taxes. (but i am not an attorney!)

What is said here is an important fact to keep in mind...good post

 

[Chancer]

No one asks if you buy or use Amazon gift cards or for details of your PayPal transactions, this is the same. My situation is unusual in that I am non dom, expat with less restrictive tax laws than the USA.

They are easy to track because they are regulated. Even Amazon gift cards need to use a senders addy and are often paid for by credit/debit cards. I think this is the first step towards regulation of crypto. The powers that be feeling cut off from potential profits/tax revenue, yes that would definitely upset the apple cart. 🙃

 

[Chancer]

wonder if anyone could reccomend a more reasonable wallet..

I'm far from a crypto expert but I've used Exodus and Electrum and both are quite reasonable. Perhaps someone more knowledgeable could give you better suggestions?

There are a few Crypto threads on here with more knowledgeable members, thats where I learnt to use it the first time.